Filed Pursuant to Rule 424(b)(3)
Registration No. 333-64777
PROSPECTUS
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$123,000,000
NORTHWEST NATURAL GAS COMPANY
SECURED MEDIUM-TERM NOTES, SERIES B
(SERIES OF FIRST MORTGAGE BONDS)
AND
UNSECURED MEDIUM-TERM NOTES, SERIES B
Due from Nine Months to 30 Years from Date of Issue
--------------------
Northwest Natural Gas Company ("Company") may offer from
time to time up to $123,000,000 aggregate principal amount of its
debt securities ("Medium-Term Notes"), consisting of its First
Mortgage Bonds, designated Secured Medium-Term Notes, Series B
("Secured Notes"), and its Unsecured Medium-Term Notes, Series B
("Unsecured Notes"). The principal amounts, interest rates,
issue prices and agents' commissions, original issue and maturity
dates, redemption provisions, if any, and other material terms of
the Medium-Term Notes will be established by the Company from
time to time and will be set forth in supplements hereto
("Pricing Supplements"). The Medium-Term Notes will have
maturities from nine months to 30 years from their respective
dates of issue. Unless otherwise specified in the Pricing
Supplement relating to any Medium-Term Note, interest on such
Medium-Term Note will accrue from its date of issue and will be
payable semi-annually in arrears on each June 1 and December 1,
and at maturity. The Medium-Term Notes will not be subject to
redemption prior to their stated maturity unless otherwise
specified in the applicable Pricing Supplement.
The Medium-Term Notes will be initially registered in the
name of CEDE & Co. as registered owner and nominee for The
Depository Trust Company, New York, New York ("DTC"). DTC will
act as a securities depositary for the Medium-Term Notes of each
issue. Sales of Medium-Term Notes will be made only in book-
entry form in denominations of $1,000 or any amount in excess
thereof that is an integral multiple of $1,000 and, except under
the limited circumstances described herein, beneficial owners of
interests in the Medium-Term Notes will not receive certificates
representing their interests in the Medium-Term Notes. Payments
of principal, premium, if any, and interest will be made through
DTC and its Participants and disbursements of such payments to
purchasers will be the responsibility of such Participants.
For further information with respect to the Medium-Term
Notes, see "Book-Entry System", "Description of the Secured
Notes", and "Description of the Unsecured Notes" herein and in
the applicable Pricing Supplement.
--------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR ANY
SUPPLEMENT HERETO. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
========================================================================
PRICE TO AGENTS' PROCEEDS TO
PUBLIC(1) COMMISSIONS(2)(3) COMPANY(2)(4)
------------------------------------------------------------------------
Per Note . . . . 100% .125%-.750% 99.875%-99.250%
------------------------------------------------------------------------
Total . . . . . . $123,000,000 $153,750-$922,500 $122,846,250-
$122,077,500
========================================================================
(1) Unless otherwise specified in the applicable Pricing
Supplement, Medium-Term Notes will be issued at 100% of
their principal amount.
(2) The Company will pay commissions to any agents engaged by
the Company ("Agents"), including Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated and
PaineWebber Incorporated, in the form of discounts, ranging
from .125% to .750% of the principal amount of any Medium-
Term Note, depending upon maturity, and may sell Medium-Term
Notes to any Agent, as principal. Unless otherwise
indicated in the applicable Pricing Supplement, a Medium-
Term Note sold to an Agent, as principal, will be purchased
by such Agent at a price equal to 100% of the principal
amount thereof less a percentage equal to the commission
applicable to an agency sale of a Medium-Term Note of
identical maturity, and may be resold by such Agent to
investors and other purchasers at varying prices related to
prevailing market prices at the time of resale as determined
by such Agent, or, if so agreed, at a fixed public offering
price. No commission will be payable on any sales made
directly by the Company.
(3) The Company has agreed to indemnify the Agents against
certain liabilities under the Securities Act of 1933, as
amended ("Securities Act").
(4) Assuming Medium-Term Notes are issued at 100% of their
principal amount and before deducting expenses payable by
the Company estimated at $225,000, including reimbursement
of certain expenses of the Agents.
--------------------
The Medium-Term Notes are being offered on a continuing
basis by the Company through the Agents, which have agreed to use
their best efforts to solicit purchases of the Medium-Term Notes.
Medium-Term Notes may also be sold to any Agent, as principal,
for resale to investors and other purchasers at varying prices
related to prevailing market prices at the time of resale, as
determined by such Agent, or, if so agreed, at a fixed public
offering price. The Company reserves the right to sell Medium-
Term Notes directly to investors on its own behalf. The Medium-
Term Notes will not be listed on any securities exchange, and
there can be no assurance that the Medium-Term Notes offered by
this Prospectus will be sold or that there will be a secondary
market for the Medium-Term Notes. The Company reserves the right
to withdraw, cancel or modify the offer made hereby without
notice. The Company or any Agent may reject, in whole or in
part, any offer to purchase Medium-Term Notes. See "Plan of
Distribution".
--------------------
Merrill Lynch & Co. PaineWebber Incorporated
--------------------
The date of this Prospectus is January 14, 1999
<PAGE>
IN CONNECTION WITH CERTAIN TYPES OF OFFERS AND SALES OF MEDIUM-
TERM NOTES, CERTAIN PERSONS PARTICIPATING IN THE OFFERING OF SUCH
MEDIUM-TERM NOTES MAY ENGAGE IN TRANSACTIONS THAT STABILIZE OR
MAINTAIN OR OTHERWISE AFFECT THE PRICE OF SUCH MEDIUM-TERM NOTES.
SUCH TRANSACTIONS MAY INCLUDE BIDS OR PURCHASES FOR THE PURPOSE
OF PEGGING, FIXING OR MAINTAINING THE PRICE OF THE MEDIUM-TERM
NOTES, THE PURCHASE OF MEDIUM-TERM NOTES TO COVER SYNDICATE SHORT
POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION
OF THESE ACTIVITIES, SEE "PLAN OF DISTRIBUTION".
--------------------
FORWARD-LOOKING STATEMENTS
This document does, and the documents incorporated herein by
reference may, contain forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of
the Securities Exchange Act of 1934, as amended ("Exchange Act").
Although the Company believes these statements are based on
reasonable assumptions, no assurance can be given that actual
results will not differ from those in the forward-looking
statements contained herein and in the incorporated documents.
The forward-looking statements contained herein and in the
incorporated documents may be affected by various uncertainties.
For a discussion of factors which may affect forward-looking
statements contained herein and in the incorporated documents,
see the Company's most recent Annual Report on Form 10-K and its
most recent Quarterly Report on Form 10-Q.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of
the Exchange Act, and, in accordance therewith, files reports and
other information with the Securities and Exchange Commission
("Commission"). Reports, proxy statements and other information
filed by the Company can be inspected and copied at the public
reference facilities of the Commission, Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, as well as
at the following regional offices: Seven World Trade Center,
Suite 1300, New York, New York 10048, and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Commission maintains a Web site
(http://www.sec.gov) that contains reports, proxy statements and
other information filed electronically by the Company.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are hereby incorporated by reference in this
Prospectus the following documents heretofore filed with the
Securities and Exchange Commission:
(1) The Company's Annual Report on Form 10-K for the year
ended December 31, 1997.
(2) The Company's Quarterly Reports on Form 10-Q for the
quarters ended March 31, June 30 and September 30,
1998.
(3) The Company's Current Reports on Form 8-K dated
February 27 and December 23, 1998.
All documents filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of
this Prospectus and prior to the termination of this offering
shall be deemed to be incorporated by reference into this
Prospectus; provided, however, that the documents enumerated
above or subsequently filed by the Company pursuant to Section 13
of the Exchange Act prior to the filing with the Commission of
the Company's most recent Annual Report on Form 10-K ("Latest
Annual Report") shall not be incorporated by reference in this
Prospectus or be a part hereof from and after the filing of the
Latest Annual Report. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded, for purposes of
this Prospectus, to the extent that a statement contained herein
or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Company hereby undertakes to provide, without charge, to
each person to whom a copy of this Prospectus shall have been
delivered, upon written or oral request of such person, a copy of
any or all of the documents which have been incorporated in this
Prospectus by reference, other than exhibits to such documents,
unless such exhibits shall have been specifically incorporated by
reference into such documents. Requests for such copies should
be directed to C.J. Rue, Secretary, Northwest Natural Gas
Company, One Pacific Square, 220 N.W. Second Avenue, Portland,
Oregon 97209, telephone 503-226-4211.
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<PAGE>
THE COMPANY
The Company is principally engaged in the distribution of
natural gas to customers in western Oregon and southwestern
Washington, including the Portland metropolitan area. The
Company and its predecessors have supplied gas service to the
public since 1859. The Company's executive offices are located
at One Pacific Square, 220 N.W. Second Avenue, Portland, Oregon
97209. Its telephone number is 503-226-4211.
USE OF PROCEEDS AND FINANCING PROGRAM
The net proceeds to be received by the Company from the sale
of the Medium-Term Notes will be added to the general funds of
the Company and used for corporate purposes, primarily to fund,
in part, the Company's ongoing utility construction program.
The Company expects its utility construction expenditures in
1999 to aggregate $110 million, and in the five-year period,
1999-2003, to aggregate between $500 million and $550 million.
It is estimated that 50% of the funds required for utility
purposes during the 1999-2003 period will be internally generated
and that the balance, as well as substantially all of the funds
required for the refunding of maturing and higher-cost debt, will
be raised through the sale of equity and debt securities,
including the Medium-Term Notes, in such amounts and at such
times as the Company's cash requirements and market conditions
shall determine. Approximately $10 million of debt securities
will mature in each of 1999 and 2000.
RATIO OF EARNINGS TO FIXED CHARGES
The ratios of earnings to fixed charges, calculated
according to the rules set forth under the Securities Act, for
the following twelve-month periods were:
TWELVE MONTHS ENDED
---------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31,
------------- ----------------------------------------------
1998 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
2.63 2.99 3.53 3.15 3.08 3.22
Earnings consist of net income to which has been added taxes
on income and fixed charges. Fixed charges consist of interest
on all indebtedness, amortization of debt expense and discount or
premium, and the estimated interest portion of rentals charged to
income.
BOOK-ENTRY SYSTEM
DTC will act as securities depositary for the Medium-Term
Notes of each issue. Except under the circumstances described
below, the Medium-Term Notes will be issued in the form of one or
more fully registered notes that will be deposited with, or on
behalf of, DTC or such other depositary as may be subsequently
designated ("Depositary"), and registered in the name of CEDE &
Co. (DTC's partnership nominee), or such other Depositary or its
nominee as may be subsequently designated.
So long as the Depositary, or its nominee, is the registered
owner of the Medium-Term Notes, such Depositary or such nominee,
as the case may be, will be considered the owner of such
Medium-Term Notes for all purposes under the Mortgage or the
Indenture (each as defined below), as the case may be, including
notices and voting. Payments of principal of, and premium, if
any, and interest on, the Medium-Term Notes will be made to the
Depositary or its nominee, as the case may be, as the registered
owner of such Medium-Term Notes. Except as set forth below,
owners of beneficial interests in Medium-Term Notes will not be
entitled to have any individual Medium-Term Notes registered in
their names, will not receive or be entitled to receive physical
delivery of any such Medium-Term Notes and will not be considered
the owners of Medium-Term Notes under the Mortgage or the
Indenture. Accordingly, each person holding a beneficial
interest in a Medium-Term Note must rely on the procedures of the
Depositary and, if such person is not a Direct Participant (as
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<PAGE>
hereinafter defined), on procedures of the Direct Participant
through which such person holds its interest, to exercise any of
the rights of the registered owner of such Medium-Term Note.
If the Depositary is at any time unwilling or unable to
continue as depositary and a successor depositary is not
appointed by the Company, individual registered Medium-Term Notes
will be issued in exchange for the Medium-Term Notes held by the
Depositary. In addition, the Company, at any time and in its sole
discretion, may determine not to have the Medium-Term Notes held
by the Depositary and, in such event, individual registered
Medium-Term Notes will be issued in exchange for the Medium-Term
Notes held by the Depositary. In any such instance, an owner of
a beneficial interest in the Medium-Term Notes will be entitled
to physical delivery of individual Medium-Term Notes equal in
principal amount to such beneficial interest and to have such
Medium-Term Notes registered in its name. Individual Medium-Term
Notes so issued will be issued as registered Medium-Term Notes in
denominations of $1,000 or any amount in excess thereof that is
an integral multiple of $1,000.
The following is based solely on information furnished by
DTC:
DTC is a limited-purpose trust company organized under the
New York Banking Law, a "banking organization" within the meaning
of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code, and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act.
DTC holds securities that its participants ("Participants")
deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic computerized
book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates.
Direct Participants include securities brokers and dealers,
banks, trust companies, clearing corporations and certain other
organizations ("Direct Participants"). DTC is owned by a number
of its Direct Participants and by The New York Stock Exchange,
Inc., the American Stock Exchange, Inc., and the National
Association of Securities Dealers, Inc. Access to the DTC system
is also available to others such as securities brokers and
dealers, banks, and trust companies that clear through or
maintain a custodial relationship with a Direct Participant,
either directly or indirectly ("Indirect Participants"). The
rules applicable to DTC and its Participants are on file with the
Commission.
Purchases of the Medium-Term Notes under the DTC system must
be made by or through Direct Participants, which will receive a
credit for the Medium-Term Notes on DTC's records. The ownership
interest of each actual purchaser of each Medium-Term Note
("Beneficial Owner") is in turn to be recorded on the Direct and
Indirect Participants' records. Beneficial Owners will not
receive written confirmation from DTC of their purchase, but
Beneficial Owners are expected to receive written confirmation
providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect
Participant through which the Beneficial Owner entered into the
transaction. Transfers of ownership interests in the Medium-Term
Notes are to be accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial
Owners will not receive certificates representing their ownership
interests in the Medium-Term Notes, except in the event that use
of the book-entry system for the Medium-Term Notes is
discontinued.
To facilitate subsequent transfers, all Medium-Term Notes
deposited by Participants with DTC are registered in the name of
CEDE & Co. The deposit of Medium-Term Notes with DTC and their
registration in the name of CEDE & Co. effect no change in
beneficial ownership. DTC has no knowledge of the actual
Beneficial Owners of the Medium-Term Notes; DTC's records reflect
only the identity of the Direct Participants to whose accounts
such Medium-Term Notes are credited, which may or may not be the
Beneficial Owners. The Participants will remain responsible for
keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to
Direct Participants, by Direct Participants to Indirect
Participants, and by Direct Participants and Indirect
Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
If the Medium-Term Notes of any issue are redeemable prior
to the maturity date, redemption notices shall be sent to CEDE &
Co. If less than all of the Medium-Term Notes of any issue are
being redeemed, DTC's practice is to determine by lot the amount
of the interest of each Direct Participant in such issue to be
redeemed.
Neither DTC nor CEDE & Co. will consent or vote with respect
to the Medium-Term Notes. Under its usual procedures, DTC mails
an Omnibus Proxy to the Company as soon as possible after the
record date. The Omnibus Proxy assigns CEDE & Co.'s consenting or
voting rights to those Direct Participants to whose accounts the
Medium-Term Notes are credited on the record date (identified in
a listing attached to the Omnibus Proxy).
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Principal and interest payments on the Medium-Term Notes
will be made to DTC. DTC's practice is to credit Direct
Participants' accounts on the date on which interest is payable
in accordance with their respective holdings shown on DTC's
records, unless DTC has reason to believe that it will not
receive payment on such payment date. Payments by Participants to
Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the
accounts of customers in bearer form or registered in "street
name", and will be the responsibility of such Participant and not
of DTC, the Mortgage Trustees (as defined below), the Indenture
Trustee (as defined below) or the Company, subject to any
statutory or regulatory requirements as may be in effect from
time to time. Payment of principal and interest to DTC is the
responsibility of the Company and the Corporate Trustee (as
defined below) or the Indenture Trustee, as the case may be.
Disbursement of such payments to Direct Participants shall be the
responsibility of DTC, and disbursement of such payments to the
Beneficial Owners shall be the responsibility of Direct and
Indirect Participants.
DTC may discontinue providing services as securities
depositary with respect to the Medium-Term Notes at any time by
giving reasonable notice to the Company, the Mortgage Trustees
and the Indenture Trustee.
-------------------------
None of the Company or the Mortgage Trustees or the
Indenture Trustee will have any responsibility or liability for
any aspect of the records relating to or payments made on account
of beneficial interests in the Medium-Term Notes or for
maintaining, supervising or reviewing any records relating to
such beneficial interests.
DESCRIPTION OF THE SECURED NOTES
GENERAL
The Secured Notes, which comprise a series of the Company's
First Mortgage Bonds ("Bonds"), are to be issued under the
Company's Mortgage and Deed of Trust, dated as of July 1, 1946,
to Bankers Trust Company ("Corporate Trustee") and R.G. Page
(Stanley Burg, successor), as trustees (together, "Mortgage
Trustees"), as supplemented by twenty supplemental indentures,
all of which are collectively referred to as the "Mortgage".
The statements herein concerning the Secured Notes and the
Mortgage are merely an outline and do not purport to be complete.
They make use of terms defined in the Mortgage and are qualified
in their entirety by express reference to the cited Sections and
Articles. They may be changed with respect to any Secured Note by
the applicable Pricing Supplement, which should be read in
conjunction with this description.
The Secured Notes will be offered on a continuing basis and
each Secured Note will mature on such date, not less than nine
months or more than 30 years from its date of issue, as selected
by the purchaser and agreed to by the Company.
The Pricing Supplement relating to each Secured Note will
set forth the principal amount, interest rate, interest payment
dates, record dates, issue price and Agent's commission or
discount, original issue and maturity dates, redemption or
repayment provisions, if any, and other material terms of such
Secured Note.
INTEREST
Unless otherwise specified in the Pricing Supplement
relating to any Secured Note, interest on such Secured Note will
be payable semi-annually in arrears on June 1 and December 1 of
each year and at maturity.
Unless otherwise specified in the Pricing Supplement
relating to any Secured Note, interest payable on any interest
payment date for any Secured Note will be payable to the person
in whose name such Secured Note is registered on the record date
with respect to such interest payment date, which shall be the
May 15 or November 15 (whether or not a business day), as the
case may be, next preceding such interest payment date; provided
that, (i) if the original issue date of any Secured Note is after
a record date and before the corresponding interest payment date,
such Secured Note shall bear interest from the original issue
date, but payment of interest shall commence on the second
interest payment date succeeding the original issue date, and
(ii) interest payable on the maturity date will be payable to the
person to whom the principal thereof shall be payable.
Unless otherwise indicated in the applicable Pricing
Supplement, interest on the Secured Notes will be computed on the
basis of a 360-day year consisting of twelve 30-day months.
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FORM, EXCHANGE AND PAYMENT
The Secured Notes will be issued in fully registered
form in denominations of $1,000 or any amount in excess thereof
that is an integral multiple of $1,000. The Secured Notes will be
exchangeable at the office of Bankers Trust Company in New York
City, without charge other than taxes or other governmental
charges incident thereto. Principal, premium, if any, and
interest will be payable at such office. (See Twentieth
Supplemental, Sec. 1.01.) Notwithstanding the foregoing, for so
long as the Secured Notes shall be held by the Depositary or its
nominee, owners of beneficial interests in the Secured Notes will
not be entitled to have any individual Secured Notes registered
in their names, and transfers of beneficial interests and
payments of principal, premium, if any, and interest will be made
as described herein under "Book-Entry System".
REDEMPTION
To the extent, if any, provided in the Pricing Supplement
relating to any Secured Note, such Secured Note will be
redeemable, on 30 days' notice, in whole or in part, at any time
on or after the initial redemption date, if any, fixed at the
time of sale and set forth in the applicable Pricing Supplement.
On or after the initial redemption date, such Secured Note will
be redeemable in whole or in part, at the option of the Company
at a redemption price determined in accordance with the following
paragraph or as set forth in the related Pricing Supplement, plus
accrued interest to the date fixed for redemption.
The redemption price for each Secured Note subject to
redemption shall, for the twelve-month period commencing on the
initial redemption date, be equal to a certain percentage of the
principal amount of such Secured Note and thereafter, shall
decline for the twelve-month period commencing on each
anniversary of the initial redemption date by a percentage of
principal amount ("Reduction Percentage") until the redemption
price shall be 100% of the principal amount. The initial
redemption date and price and any Reduction Percentage with
respect to each Secured Note subject to redemption will be fixed
at the time of sale and set forth in the applicable Pricing
Supplement.
If so specified in the Pricing Supplement relating to any
Secured Note, the Company may not, prior to the redemption
limitation date, if any, set forth in such Pricing Supplement,
redeem such Secured Note as contemplated above as a part of, or
in anticipation of, any refunding operation by the application,
directly or indirectly, of moneys borrowed having an effective
interest cost to the Company (calculated in accordance with
generally accepted financial practice) of less than the effective
interest cost to the Company (similarly calculated) of such
Secured Note.
If, at the time the notice of redemption shall be given, the
redemption money shall not be on deposit with the Corporate
Trustee, the redemption may be made subject to the receipt of
such money before the date fixed for redemption, and such notice
shall be of no effect unless such money shall be so received.
Unless otherwise indicated in the applicable Pricing
Supplement, the Secured Notes will not be subject to any sinking
fund.
REPAYMENT AT OPTION OF HOLDER
To the extent, if any, provided in the Pricing Supplement
relating to any Secured Note, such Secured Note will be repayable
by the Company at the option of the registered holder thereof on
the date specified in such Pricing Supplement ("Repayment Date"),
at a price equal to a percentage of the principal amount of such
Secured Note specified in such Pricing Supplement ("Repayment
Price"), plus accrued interest to the date of repayment. For any
Secured Note to be repaid, the Company must receive such Secured
Note at its office or agency in the Borough of Manhattan, The
City of New York (currently, the office of the Corporate
Trustee), within the period ("Election Period") commencing at the
opening of business and ending at the close of business on the
dates specified in the Pricing Supplement relating to such
Secured Note (provided that, if the last day of the Election
Period shall not be a business day, the Election Period shall end
at the close of business on the next succeeding business day),
together with the form entitled "Option to Elect Repayment" on
the reverse of, or otherwise accompanying, such Secured Note duly
completed. Any such election so received by the Company within
such Election Period shall be irrevocable. The repayment option
may be exercised by the registered holder of a Secured Note for
less than the entire principal amount of such Secured Note,
provided that the principal amount to be repaid is equal to
$1,000 or an integral multiple of $1,000. All questions as to
the validity, eligibility (including time of receipt) and
acceptance of any Secured Note for repayment will be determined
by the Corporate Trustee, whose determination will be final and
binding.
So long as the Depositary or the Depositary's nominee is the
registered holder of the Secured Notes, the Depositary or such
nominee will be the only entity that can exercise the repayment
option, and repayment will be made in accordance with the
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Depositary's repayment procedures in effect at the time. See
"Book-Entry System." In order to ensure that the Depositary or
its nominee will timely exercise a repayment option with respect
to a particular beneficial interest in the Secured Notes, the
Beneficial Owner of such interest must instruct the broker or
other Direct or Indirect Participant through which it holds such
interest to notify the Depositary of its election to exercise the
repayment option. In addition, the Beneficial Owner must effect
delivery of such interest at the time such notice of election is
given to the Depositary by causing the broker or other Direct or
Indirect Participant through which it holds such interest to
transfer such interest on the Depositary's records to the
Corporate Trustee. Different firms have different deadlines for
accepting instructions from their customers and, accordingly,
each Beneficial Owner should consult the broker or other Direct
or Indirect Participant through which it holds an interest in the
Secured Notes in order to ascertain the deadline by which such
instruction must be given in order for timely notice to be
delivered to the Depositary.
PROVISIONS FOR MAINTENANCE OF PROPERTY
While the Mortgage contains provisions for the maintenance
of the Mortgaged and Pledged Property, the Mortgage does not
permit redemption of Bonds pursuant to these provisions.
SECURITY
The Secured Notes together with all other Bonds now or
hereafter issued under the Mortgage will be secured by the
Mortgage, which constitutes a first mortgage lien on certain gas
utility properties owned from time to time by the Company (except
as stated below), subject to (a) leases of minor portions of the
Company's property to others for uses which do not interfere with
the Company's business, (b) leases of certain property of the
Company not used in its gas utility business or the gas
by-product business, (c) excepted encumbrances, and (d) minor
defects and encumbrances customarily found in properties of like
size and character which do not impair the use of such properties
by the Company. There are excepted from the lien all cash and
securities; certain equipment, apparatus, materials or supplies;
aircraft, automobiles and other vehicles; receivables, contracts,
leases and operating agreements; timber, minerals, mineral rights
and royalties; and all natural gas and oil production property.
The Mortgage contains provisions subjecting after-acquired
property (subject to pre-existing liens) to the lien thereof,
subject to limitations in the case of consolidation, merger or
sale of substantially all of the Company's assets. (See
Mortgage, Art. XVI.)
The Mortgage provides that the Mortgage Trustees shall have
a lien upon the mortgaged property, prior to that of the Bonds,
for the payment of their reasonable compensation and expenses and
for indemnity against certain liabilities. (See Mortgage, Sec.
96).
ISSUANCE OF ADDITIONAL BONDS
Bonds may be issued from time to time on the basis of (1)
60% of property additions, after adjustments to offset
retirements (see "Modification of the Mortgage -- Issuance of
Additional Bonds" below); (2) retirement of Bonds or qualified
lien bonds; or (3) deposit of cash. With certain exceptions in
the case of (2) above, the issuance of Bonds is subject to
adjusted net earnings before income taxes for 12 consecutive
months out of the preceding 15 months being at least twice the
annual interest requirements on all Bonds at the time
outstanding, including the additional issue, and all indebtedness
of prior rank.
Property additions generally include gas, electric, steam or
hot water property or gas by-product property acquired after
March 31, 1946, but may not include securities, airplanes,
automobiles or other vehicles, or natural gas transmission lines
or natural gas and oil production property. As of October 31,
1998, approximately $346 million of property additions (including
$72 million of property additions previously certified as the
basis for the issuance of $43 million of the Secured Notes) and
$127 million of retired Bonds were available for use as the basis
for the issuance of Bonds. In November 1998, the Company issued
$20 million of Secured Notes on the basis of approximately $33
million of such property additions.
The Mortgage contains certain restrictions upon the issuance
of Bonds against property subject to liens.
The Secured Notes will be issued against property additions
and retired Bonds.
(See Mortgage, Secs. 4-7, 20-30 and 46, and Third
Supplemental, Secs. 3 and 4.)
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RELEASE AND SUBSTITUTION OF PROPERTY
Property may be released against (1) deposit of cash or, to
a limited extent, purchase money mortgages, (2) property
additions, or (3) waiver of the right to issue Bonds without
applying any earnings test. Cash so deposited and cash deposited
against the issuance of additional bonds may be withdrawn upon
the bases stated in (2) and (3) above. When property released is
not funded property, property additions used to effect the
release may again, in certain cases, become available as credits
under the Mortgage, and the waiver of the right to issue Bonds to
effect the release may, in certain cases, cease to be effective
as such a waiver. Similar provisions are in effect as to cash
proceeds of such property. The Mortgage contains special
provisions with respect to qualified lien bonds pledged and the
disposition of moneys received on pledged prior lien bonds. (See
Mortgage, Secs. 5, 31, 32, 37, 46 to 50, 59 to 61, 100 and 118.)
SATISFACTION AND DISCHARGE OF MORTGAGE
The lien of the Mortgage may be canceled and discharged
whenever all indebtedness secured by the Mortgage has been paid.
Bonds, or any portion of the principal amount thereof, will,
prior to the maturity thereof, be deemed to have been paid for
purposes of satisfying the lien of the Mortgage and shall not be
deemed to be outstanding for any other purpose of the Mortgage if
there shall have been deposited with the Corporate Trustee either
(i) moneys in the necessary amount or (ii) (a) direct obligations
of the government of the United States of America or (b)
obligations guaranteed by the government of the United States of
America or (c) securities that are backed by obligations of the
government of the United States of America as collateral under an
arrangement by which the interest and principal payments on the
collateral generally flow immediately through to the holder of
the security, which in any case are not subject to redemption
prior to maturity by anyone other than the holders, the principal
of and the interest on which when due, and without any regard to
reinvestment thereof, shall be sufficient to pay when due the
principal of, premium, if any, and interest due and to become due
on said Bonds or portions thereof on the redemption date or
maturity date thereof, as the case may be. (See Mortgage, Sec.
106 and Thirteenth Supplemental, Sec. 3.02.)
DEFAULTS AND NOTICE THEREOF
Defaults are: default in payment of principal, default for
60 days in payment of interest or of installments of funds for
retirement of Bonds; certain defaults with respect to qualified
lien bonds; certain events in bankruptcy, insolvency or
reorganization; and default for 90 days after notice in the case
of a breach of any other covenant. The Mortgage Trustees may
withhold notice of default (except in payment of principal,
interest or any fund for the retirement of Bonds) if they think
it in the interest of the Bondholders. (See Mortgage, Secs. 65
and 66.)
Holders of 25% of the Bonds may declare the principal and
the interest due on default, but a majority may annul such
declaration if such default has been cured. No holder of Bonds
may enforce the lien of the Mortgage without giving the Mortgage
Trustees written notice of a default and unless holders of 25% of
the Bonds have requested the Mortgage Trustees to act and offered
them reasonable opportunity to act and the Mortgage Trustees have
failed to act. The Mortgage Trustees are not required to risk
their funds or incur personal liability if there is reasonable
ground for believing that the repayment is not reasonably
assured. Holders of a majority of the Bonds may direct the time,
method and place of conducting any proceedings for any remedy
available to the Mortgage Trustees, or exercising any trust or
power conferred upon the Mortgage Trustees, but the Mortgage
Trustees are not required to follow such direction if not
sufficiently indemnified for expenditures. (See Mortgage, Secs.
67, 71, 80 and 94.)
EVIDENCE TO BE FURNISHED TO THE MORTGAGE TRUSTEES
Compliance with Mortgage provisions is evidenced by written
statements of the Company's officers or persons selected by the
Company. In certain major matters the accountant, engineer,
appraiser or other expert must be independent. Various
certificates and other papers, including an annual certificate
with reference to compliance with the terms of the Mortgage and
absence of defaults, are required to be filed annually and upon
the occurrence of certain events. (See Mortgage, Secs. 38-46.)
MODIFICATION OF THE MORTGAGE
The rights of the Bondholders may be modified with the
consent of 70% of the Bonds and, if less than all series of Bonds
are affected, the consent also of 70% of Bonds of each series
affected. The Company has the right, without any consent or
other action by holders of any series of Bonds, to substitute
66 % for 70%. In general, no modification of the terms of
payment of principal and interest, affecting the lien of the
Mortgage or reducing the percentage required for modification
(except as provided above) will be effective against any
Bondholder without his consent. (See Mortgage, Art. XIX and
Ninth Supplemental, Sec.6.)
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The Company has reserved the right to amend the Mortgage,
without any consent or other action by holders of the Bonds of
the Nineteenth Series or of Bonds of any subsequently created
series (including the Secured Notes), in the following respects:
Release and Substitution of Property
To permit the release of property at the lesser of its cost
or its fair value at the time that such property became funded
property, rather than at its fair value at the time of its
release; and to facilitate the release of unfunded property.
(See Mortgage, Secs. 3, 59 and 60 and Eighteenth Supplemental,
Sec. 2.03.)
Issuance of Additional Bonds
To clarify that (i) for purposes of determining annual
interest requirements, interest on Bonds or other indebtedness
bearing interest at a variable interest rate shall be computed at
the average of the interest rates borne by such Bonds or other
indebtedness during the period of calculation or, if such Bonds
or other indebtedness shall have been issued after such period or
shall be the subject of pending applications, interest shall be
computed at the initial rate borne upon issuance, and (ii) no
extraordinary items shall be included in operating expenses or
deducted from revenues or other income in calculating adjusted
net earnings (See Mortgage, Sec. 7.); and to revise the basis for
the issuance of additional Bonds from 60% of property additions,
after adjustments to offset retirements, to 70%. (See Mortgage,
Secs. 25, 26, 59 and 61 and Eighteenth Supplemental, Secs. 2.01
and 2.02.)
THE CORPORATE TRUSTEE
Bankers Trust Company also serves as the Indenture Trustee
under the Indenture under which the Unsecured Notes are issued.
DESCRIPTION OF THE UNSECURED NOTES
GENERAL
The Unsecured Notes are to be issued under an Indenture,
dated as of June 1, 1991 ("Indenture"), between the Company and
Bankers Trust Company, as trustee ("Indenture Trustee").
The statements herein concerning the Unsecured Notes and the
Indenture are merely an outline and do not purport to be
complete. They make use of terms defined in the Indenture and
are qualified in their entirety by express reference to the cited
Sections and Articles. They may be changed with respect to any
Unsecured Note by the applicable Pricing Supplement, which should
be read in conjunction with this description.
The Indenture provides that debt securities (including the
Unsecured Notes and including both interest bearing and original
issue discount securities) may be issued thereunder, without
limitation as to aggregate principal amount. (See Indenture, Sec.
301.) All debt securities heretofore or hereafter issued under
the Indenture (including the Unsecured Notes) are collectively
referred to as the "Indenture Securities". The Indenture does not
limit the amount of other debt, secured or unsecured, which may
be issued by the Company. The Unsecured Notes will rank pari
passu with all other unsecured and unsubordinated indebtedness of
the Company. Substantially all of the gas plants, distribution
systems and other materially important physical properties of the
Company are subject to the lien of the Mortgage securing the
Company's Bonds. (See "Description of the Secured Notes--
Security" and "-- Issuance of Additional Bonds", above.)
The Unsecured Notes will be offered on a continuing basis,
and each Unsecured Note will mature on such date, not less than
nine months nor more than 30 years from its date of issue, as
selected by the purchaser and agreed to by the Company.
The Pricing Supplement relating to any Unsecured Note will
set forth the principal amount, interest rate, interest payment
dates, regular record dates, issue price and Agent's commission
or discount, original issue and maturity dates, redemption or
repayment provisions, if any, and other material terms of such
Unsecured Note.
INTEREST
Unless otherwise specified in the Pricing Supplement
relating to any Unsecured Note, interest on such Unsecured Note
will be payable semi-annually in arrears on June 1 and December 1
of each year and at maturity.
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Unless otherwise specified in the Pricing Supplement
relating to any Unsecured Note, interest payable on any interest
payment date for any Unsecured Note will be payable to the person
in whose name such Unsecured Note is registered on the record
date with respect to such interest payment date, which shall be
the May 15 or November 15 (whether or not a business day), as the
case may be, next preceding such interest payment date; provided
that, (i) if the original issue date of any Unsecured Note is
after a record date and before the corresponding interest payment
date, such Unsecured Note will bear interest from the original
issue date but payment of interest shall commence on the second
interest payment date succeeding the original issue date, and
(ii) interest payable on the maturity date will be payable to the
person to whom the principal thereof shall be payable.
Unless otherwise indicated in the applicable Pricing
Supplement, interest on the Unsecured Notes will be computed on
the basis of a 360-day year consisting of twelve 30-day months.
FORM, EXCHANGE AND PAYMENT
The Unsecured Notes will be issued in fully registered form
in denominations of $1,000 or any amount in excess thereof that
is an integral multiple of $1,000. The Unsecured Notes will be
exchangeable at the office of Bankers Trust Company in New York
City, without charge other than taxes or other governmental
charges incident thereto. Principal, premium, if any, and
interest will be payable at such office. Notwithstanding the
foregoing, for so long as the Unsecured Notes shall be held by
the Depositary or its nominee, owners of beneficial interests in
the Unsecured Notes will not be entitled to have any individual
Unsecured Notes registered in their names, and transfers of
beneficial interests and payments of principal, premium, if any,
and interest will be made as described herein under "Book-Entry
System".
REDEMPTION
To the extent, if any, provided in the Pricing Supplement
relating to any Unsecured Note, such Unsecured Note will be
redeemable, on not less than 30 days' notice, in whole or in
part, at any time on or after the initial redemption date, if
any, fixed at the time of sale and set forth in the applicable
Pricing Supplement. On or after the initial redemption date,
such Unsecured Note will be redeemable in whole or in part, at
the option of the Company, at a redemption price determined in
accordance with the following paragraph or as set forth in the
related Pricing Supplement, plus accrued interest to the date
fixed for redemption.
The redemption price for each Unsecured Note subject to
redemption shall, for the twelve-month period commencing on the
initial redemption date, be equal to a certain percentage of the
principal amount of such Unsecured Note and, thereafter, shall
decline for the twelve-month period commencing on each
anniversary of the initial redemption date by a percentage of
principal amount ("Reduction Percentage") until the redemption
price shall be 100% of the principal amount. The initial
redemption price and date and any Reduction Percentage with
respect to each Unsecured Note subject to redemption will be
fixed at the time of sale and set forth in the applicable Pricing
Supplement.
If so specified in the Pricing Supplement relating to any
Unsecured Note, the Company may not, prior to the redemption
limitation date, if any, set forth in such Pricing Supplement,
redeem such Unsecured Note as contemplated above as a part of, or
in anticipation of, any refunding operation by the application,
directly or indirectly, of moneys borrowed having an effective
interest cost to the Company (calculated in accordance with
generally accepted financial practice) of less than the effective
interest cost to the Company (similarly calculated) of such
Unsecured Note.
If, at the time the notice of redemption shall be given, the
redemption money shall not be on deposit with the Indenture
Trustee, the redemption shall be made subject to the receipt of
such money on or before the date fixed for redemption, and such
notice shall be of no effect unless such money shall be so
received. (See Indenture, Art. Four.)
Unless otherwise indicated in the applicable Pricing
Supplement, the Unsecured Notes will not be subject to any
sinking fund.
REPAYMENT AT OPTION OF HOLDER
To the extent, if any, provided in the Pricing Supplement
relating to any Unsecured Note, such Unsecured Note will be
repayable by the Company at the option of the registered holder
thereof on the date specified in such Pricing Supplement
("Repayment Date"), at a price equal to a percentage of the
principal amount of such Unsecured Note specified in such Pricing
Supplement ("Repayment Price"), plus accrued interest to the date
of repayment. For any Unsecured Note to be repaid, the Company
must receive such Unsecured Note at its office or agency in the
Borough of Manhattan, The City of New York (currently, the office
of the Indenture Trustee), within the period ("Election Period")
commencing at the opening of business and ending at the close of
business on the dates specified in the Pricing Supplement
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relating to such Unsecured Note (provided that, if the last day
of the Election Period shall not be a business day, the Election
Period shall end at the close of business on the next succeeding
business day), together with the form entitled "Option to Elect
Repayment" on the reverse of, or otherwise accompanying, such
Unsecured Note duly completed. Any such election so received by
the Company within such Election Period shall be irrevocable.
The repayment option may be exercised by the registered holder of
an Unsecured Note for less than the entire principal amount of
such Unsecured Note, provided that the principal amount to be
repaid is equal to $1,000 or an integral multiple of $1,000. All
questions as to the validity, eligibility (including time of
receipt) and acceptance of any Unsecured Note for repayment will
be determined by the Indenture Trustee, whose determination will
be final and binding.
So long as the Depositary or the Depositary's nominee is the
registered holder of the Unsecured Notes, the Depositary or such
nominee will be the only entity that can exercise the repayment
option, and repayment will be made in accordance with the
Depositary's repayment procedures in effect at the time. See
"Book-Entry System." In order to ensure that the Depositary or
its nominee will timely exercise a repayment option with respect
to a particular beneficial interest in the Unsecured Notes, the
Beneficial Owner of such interest must instruct the broker or
other Direct or Indirect Participant through which it holds such
interest to notify the Depositary of its election to exercise the
repayment option. In addition, the Beneficial Owner must effect
delivery of such interest at the time such notice of election is
given to the Depositary by causing the broker or other Direct or
Indirect Participant through which it holds such interest to
transfer such interest on the Depositary's records to the
Indenture Trustee. Different firms have different deadlines for
accepting instructions from their customers and, accordingly,
each Beneficial Owner should consult the broker or other Direct
or Indirect Participant through which it holds an interest in the
Unsecured Notes in order to ascertain the deadline by which such
instruction must be given in order for timely notice to be
delivered to the Depositary.
DEFEASANCE
The principal amount of any Unsecured Notes issued under the
Indenture will be deemed to have been paid for purposes of the
Indenture and the entire indebtedness of the Company in respect
thereof will be deemed to have been satisfied and discharged, if
there shall have been irrevocably deposited with the Indenture
Trustee, in trust: (a) money in an amount which will be
sufficient, or (b) in the case of a deposit made prior to the
maturity of the Unsecured Notes, Government Obligations (as
defined herein), which do not contain provisions permitting the
redemption or other prepayment thereof at the option of the
issuer thereof, the principal of and the interest on which when
due, without any regard to reinvestment thereof, will provide
moneys which, together with the money, if any, deposited with or
held by the Indenture Trustee, will be sufficient, or (c) a
combination of (a) and (b) which will be sufficient, to pay when
due the principal of and premium, if any, and interest, if any,
due and to become due on the Unsecured Notes that are
outstanding. For this purpose, Government Obligations include
direct obligations of, or obligations unconditionally guaranteed
by, the United States of America entitled to the benefit of the
full faith and credit thereof and certificates, depositary
receipts or other instruments which evidence a direct ownership
interest in such obligations or in any specific interest or
principal payments due in respect thereof. (See Indenture, Secs.
101, 701.)
If the Company shall make any deposit of money and/or
Government Obligations with respect to the Unsecured Notes, or
any portion of the principal amount thereof, prior to the
Maturity or redemption of such Unsecured Notes or such portion of
the principal amount thereof, for the satisfaction or discharge
of the indebtedness of the Company in respect to such Unsecured
Notes or such portion thereof as contemplated by Section 701 of
the Indenture, the Company shall deliver to the Indenture Trustee
either (a) an instrument wherein the Company, notwithstanding
such satisfaction and discharge, shall assume the obligation
(which shall be absolute and unconditional) to irrevocably
deposit with the Indenture Trustee such additional sums of money,
if any, or additional Government Obligations, if any, or any
combination thereof, at such time or times, as shall be
necessary, together with the money and/or Government Obligations
theretofore so deposited, to pay when due the principal of and
premium, if any, and interest due and to become due on such
Unsecured Notes or such portions thereof, all in accordance with
and subject to the provisions of said Section 701; provided,
however, that such instrument may state that the obligation of
the Company to make additional deposits as aforesaid shall be
subject to the delivery to the Company by the Indenture Trustee
of a notice asserting the amount of such deficiency accompanied
by an opinion of an independent public accountant of nationally
recognized standing, selected by the Indenture Trustee, showing
the calculation thereof, or (b) an opinion of Counsel to the
effect that the Holders of such Unsecured Notes, or such portions
of the principal amount thereof, will not recognize income, gain
or loss for United States federal income tax purposes as a result
of such satisfaction and discharge and will be subject to United
States federal income tax on the same amounts, at the same times
and in the same manner as if such satisfaction and discharge had
not been effected.
In the event that the Company shall elect to deliver to the
Indenture Trustee an instrument as described in clause (a) of the
preceding paragraph in connection with any such deposit of money
and/or Government Obligations with the Indenture Trustee, under
current applicable United States federal income tax regulations,
the Holders of such Unsecured Notes, or such portions thereof,
will not recognize income, gain or loss for United States federal
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income tax purposes as a result of such satisfaction and
discharge and will be subject to United States federal income tax
on the same amounts, at the same times and in the same manner as
if such deposit had not been effected. There can be no assurance
that such United States federal income tax regulations will not
change such that, as a result of such deposit and delivery by the
Company of such instrument, Holders may recognize income, gain or
loss for United States federal income tax purposes and may not be
subject to United States federal income tax on the same amounts,
at the same times and in the same manner as if such deposit had
not been effected.
EVENTS OF DEFAULT AND NOTICE THEREOF
Events of Default are: default for three Business Days in
payment of principal; default for 60 days in payment of interest;
certain events in bankruptcy, insolvency or reorganization;
default for 90 days after notice in the case of a breach of any
other covenant; and any other Event of Default specified with
respect to the Indenture Securities of a particular series. No
Event of Default with respect to a series of Indenture Securities
necessarily constitutes an Event of Default with respect to the
Indenture Securities of any other series. The Indenture Trustee
may withhold notice of default (except in payment of principal,
interest or any funds for the retirement of Indenture Securities)
if it, in good faith, determines that withholding of such notice
is in the interest of the Holders of the Indenture Securities.
(See Indenture, Secs. 801 and 903.)
Either the Indenture Trustee or the Holders of not less than
33% in principal amount (or such lesser amount as may be provided
in the case of discount Indenture Securities) of the outstanding
Indenture Securities of all defaulted series, considered as one
class, may declare the principal and interest on such series due
on default, but the Company may annul such default by effecting
its cure and paying overdue interest and principal. No Holder of
Indenture Securities may enforce the Indenture without having
given the Indenture Trustee written notice of default, and unless
the Holders of a majority of the Indenture Securities of all
defaulted series, considered as one class, shall have requested
the Indenture Trustee to act and offered reasonable indemnity,
and for 60 days the Indenture Trustee shall have failed to act.
But, each Holder has an absolute right to receive payment of
principal and interest when due and to institute suit for the
enforcement of such payment. The Indenture Trustee is not
required to risk its funds or incur any financial liability if it
shall have reasonable grounds for believing that repayment is not
reasonably assured. The Holders of a majority of the Indenture
Securities of all defaulted series, considered as one class, may
direct the time, method and place of conducting any proceedings
for any remedy available to the Indenture Trustee, or exercising
any trust or power conferred on the Indenture Trustee, with
respect to the Indenture Securities of such series, but the
Indenture Trustee is not required to follow such direction if not
sufficiently indemnified and the Indenture Trustee may take any
other action it deems proper which is not inconsistent with such
direction. (See Indenture, Secs. 802, 807, 808, 812 and 902.)
EVIDENCE TO BE FURNISHED TO THE INDENTURE TRUSTEE
Compliance with Indenture provisions will be evidenced by
written statements of the Company's officers. An annual
certificate with reference to compliance with the covenants and
conditions of the Indenture and the absence of defaults is
required to be filed with the Indenture Trustee. (See Indenture,
Sec.1004.)
MODIFICATION OF THE INDENTURE
The rights of the Holders of the Indenture Securities may be
modified with the consent of the Holders of a majority of the
Indenture Securities of all series or Tranches, as defined below,
affected, considered as one class. However, certain specified
rights of the Holders of Indenture Securities may be modified
without the consent of the Holders if such modification would not
be deemed adversely to affect their interests in any material
respect. In general, no modification of the terms of payment of
principal and interest, no reduction of the percentage in
principal amount of the Indenture Securities outstanding under
such series required to consent to any supplemental indenture or
waiver under the Indenture, no reduction of such percentage
necessary for quorum and voting, and no modification of certain
of the provisions in the Indenture relating to supplemental
indentures, waivers of certain covenants and waivers of past
defaults is effective against any Holder of Indenture Securities
without his consent. "Tranche" means a group of Indenture
Securities which are of the same series and have identical terms
except as to principal amount and/or date of issuance. (See
Indenture, Art. Twelve.)
THE INDENTURE TRUSTEE
Bankers Trust Company also serves as the Corporate Trustee
under the Mortgage under which the Secured Notes are issued.
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PLAN OF DISTRIBUTION
The Medium-Term Notes are being offered on a continuing
basis for sale by the Company through the Agents which have
agreed to use their best efforts to solicit purchases of the
Medium-Term Notes. The initial Agents are Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated and
PaineWebber Incorporated. Should the Company designate other
persons to act as Agents, the names of such persons will be
disclosed in a Pricing Supplement. The Company will pay each
Agent a commission which, depending on the maturity of the
Medium-Term Notes, will range from .125% to .750% of the
principal amount of any Medium-Term Note sold through such Agent.
The Company may also sell Medium-Term Notes to any Agent, as
principal, at a discount from the principal amount thereof, and
the Agent may later resell such Medium-Term Notes to investors
and other purchasers at varying prices related to prevailing
market prices at the time of resale as determined by such Agent
or, if so agreed, at a fixed public offering price. In the case
of sales to any Agent as principal, such Agent may utilize a
selling or dealer group in connection with resales. An Agent may
sell Medium-Term Notes it has purchased as principal to any
dealer at a discount and, unless otherwise specified in the
applicable Pricing Supplement, such discount allowed to any
dealer will not be in excess of the discount to be received by
such Agent from the Company. After the initial public offering
of Medium-Term Notes to be resold to investors and other
purchasers, the public offering price (in the case of a fixed
price public offering), concession and discount may be changed.
The Medium-Term Notes also may be sold by the Company directly to
purchasers. No commission will be payable to the Agents on
Medium-Term Notes sold directly by the Company.
The Company reserves the right to withdraw, cancel or modify
the offer made hereby without notice and may reject, in whole or
in part, offers to purchase Medium-Term Notes whether placed
directly with the Company or through one of the Agents. Each
Agent will have the right, in its discretion reasonably
exercised, to reject any offer to purchase Medium-Term Notes
received by it, in whole or in part.
Payment of the purchase price of the Medium-Term Notes will
be required to be made in immediately available funds in New York
City on the date of settlement.
No Medium-Term Note will have an established trading market
when issued. The Medium-Term Notes will not be listed on any
securities exchange. Each of the Agents may from time to time
purchase and sell Medium-Term Notes in the secondary market, but
is not obligated to do so. There can be no assurance that there
will be a secondary market for the Medium-Term Notes or liquidity
in the secondary market if one develops. From time to time, each
of the Agents may make a market in the Medium-Term Notes.
The Agents may be deemed to be "underwriters" within the
meaning of the Securities Act. The Company has agreed to
indemnify each of the Agents against, or to make contributions
relating to, certain liabilities, including liabilities under
such Act. The Company has agreed to reimburse each of the Agents
for certain expenses. Each of the Agents may engage in
transactions with, or perform services for, the Company in the
ordinary course of business.
In connection with certain types of offers and sales of
Medium-Term Notes, rules of the Securities and Exchange
Commission permit the Agents to engage in certain transactions
that stabilize the price of such Medium-Term Notes. Such
transactions consist of bids or purchases for the purpose of
pegging, fixing or maintaining the price of the Medium-Term
Notes.
If the Agents create a short position in any Medium-Term
Notes in connection with certain types of offers and sales, i.e.,
if they sell more Medium-Term Notes than are set forth in the
applicable Pricing Supplement, the Agents may reduce that short
position by purchasing Medium-Term Notes in the open market.
In connection with certain types of offers and sales, the
Agents may also impose a penalty bid on certain Agents and
selling group members. This means that if the Agents purchase
Medium-Term Notes in the open market to reduce the Agents' short
position or to stabilize the price of the Medium-Term Notes, they
may reclaim the amount of selling concession from the Agents and
selling group members who sold these Medium-Term Notes as part of
the offering.
In general, purchases of a security for the purpose of
stabilization or to reduce a short position could cause the price
of the security to be higher than it might be in the absence of
such purchases. The imposition of a penalty bid might also have
an effect on the price of a security to the extent that it were
to discourage resales of the security.
Neither the Company nor any Agent makes any representation
or prediction as to the direction or magnitude of any effect that
the transactions described above may have on the price of the
Medium-Term Notes. In addition, neither the Company nor any
Agent makes any representation that the Agents will engage in
such transactions or that such transactions, once commenced, will
not be discontinued without notice.
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EXPERTS
The financial statements incorporated in this Prospectus by
reference to the Company's Annual Report on Form 10-K for the
year ended December 31, 1997 have been so incorporated in
reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in
auditing and accounting.
The financial statements as of and for the years ended
December 31, 1995 and 1996 incorporated in this Prospectus by
reference to the Latest Annual Report have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their
report, which is incorporated herein by reference, and have been
so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
The statements made as to matters of law and legal
conclusions under "Description of the Secured Notes--Security"
herein have been reviewed (a) insofar as Oregon law is concerned,
by Mark S. Dodson, Esquire, General Counsel of the Company; and
(b) insofar as Washington law is concerned, by Stoel Rives LLP,
Portland, Oregon, and have been set forth herein in reliance upon
the opinions of Mr. Dodson and such firm given upon their
authority as experts. The statements made as to matters of law
and legal conclusions in the documents incorporated in this
Prospectus by reference pertaining to titles to properties,
franchises and other operating rights of the Company, regulations
to which the Company is subject and any legal proceedings to
which the Company is a party, insofar as Oregon law is concerned,
have been reviewed by Mr. Dodson and such statements are included
in such documents and herein in reliance upon the opinion of Mr.
Dodson given upon his authority as an expert. As of January 14,
1999, Mr. Dodson owned 4,500 shares of the Company's common stock
and had been granted options to purchase an additional 5,000
shares.
LEGALITY
The legality of the Medium-Term Notes will be passed upon
for the Company by Mr. Dodson and by Messrs. Thelen Reid & Priest
LLP, New York, New York, and for the agents by Messrs. Simpson
Thacher & Bartlett, New York, New York. Messrs. Thelen Reid &
Priest LLP and Messrs. Simpson Thacher & Bartlett may rely upon
the opinion of Mr. Dodson as to certain legal matters arising
under Oregon law and Mr. Dodson, Messrs. Thelen Reid & Priest LLP
and Messrs. Simpson Thacher & Bartlett may rely upon the opinion
of Stoel Rives LLP as to certain legal matters arising under
Washington law. However, all matters pertaining to titles, the
lien and enforceability of the Mortgage and franchises, will be
passed upon only by Mr. Dodson, who may rely on the opinion of
Stoel Rives LLP as to certain legal matters arising under
Washington law.
14
<PAGE>
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NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED
IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF
ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN
ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
TABLE OF CONTENTS
Forward-Looking Statements . . . . . . . . . . . . . . . . . 2
Available Information . . . . . . . . . . . . . . . . . . . . 2
Incorporation of Certain Documents By Reference . . . . . . . 2
The Company . . . . . . . . . . . . . . . . . . . . . . . . . 3
Use of Proceeds and Financing Program . . . . . . . . . . . . 3
Ratio of Earnings to Fixed Charges . . . . . . . . . . . . . 3
Book-Entry System . . . . . . . . . . . . . . . . . . . . . . 3
Description of the Secured Notes . . . . . . . . . . . . . . 5
Description of the Unsecured Notes . . . . . . . . . . . . . 9
Plan of Distribution . . . . . . . . . . . . . . . . . . . . 13
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Legality . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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$123,000,000
NORTHWEST
NATURAL GAS COMPANY
SECURED MEDIUM-TERM NOTES,
SERIES B
(SERIES OF FIRST MORTGAGE BONDS)
AND
UNSECURED MEDIUM-TERM NOTES,
SERIES B
Due from Nine Months to 30 Years
from Date of Issue
----------------------
P R O S P E C T U S
----------------------
MERRILL LYNCH & CO.
PAINEWEBBER INCORPORATED
January 14, 1999
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